As India prepares for its Union Budget 2025-26, RBI Monetary Policy Committee (MPC) member Nagesh Kumar has called for an increased focus on capital expenditure (CapEx) and infrastructure development to support sustainable economic growth. Speaking ahead of the budget, Kumar stressed the need for continued infrastructure investment, especially as India faces global uncertainties and moderating domestic growth.
Focus on Infrastructure to Strengthen Economic Growth
Kumar emphasized that sustaining and expanding infrastructure spending is key to achieving a more robust economic trajectory for India. He noted that, while the Indian economy showed strong recovery post-COVID-19, this pent-up demand is now starting to fade, necessitating a boost through increased public investment.
“In the context of the slight slowdown we saw in the second quarter, it is vital to focus on sustainable and robust growth,” Kumar said, adding that Finance Minister Nirmala Sitharaman should continue her focus on capital expenditure and infrastructure spending, which she had prioritized over the last two years.
Need for a Boost in Public Spending
The upcoming Budget comes at a critical time, with India’s GDP growth in the second quarter of FY 2025 dropping to a seven-quarter low of 5.4%. Kumar urged the government to maintain momentum by increasing public spending, noting that post-pandemic recovery was primarily driven by pent-up demand. As this demand wanes, a sustained public spending push would be crucial to maintaining growth.
Finance Minister Nirmala Sitharaman had previously allocated Rs 11.11 lakh crore for capital expenditure in the 2024-25 Budget, alongside plans for viability gap funding to encourage private infrastructure investment. Kumar’s recommendation is in line with the government’s strategic focus on infrastructure as a long-term growth driver.
Rupee Depreciation and Its Impact
Addressing concerns over the weakening of the Indian rupee, Kumar explained that it is primarily the result of a strengthening US dollar, driven by the strong performance of the American economy. He pointed out that the rupee’s depreciation should be seen in the context of a global trend, where other currencies are also weakening against the dollar.
“The weakness of the rupee is more a reflection of the dollar’s strength,” Kumar said. However, he reassured that the rupee, in real terms, is still somewhat overvalued, and managing it at a more competitive exchange rate could benefit India’s exports and manufacturing sectors.
The Issue of Freebies and Long-Term Development
Kumar also voiced concerns over the growing trend of giveaways or “freebies,” which he believes could undermine long-term development. He argued that resources that could be used for infrastructure development and addressing regional disparities are being diverted into short-term handouts.
“We must ask the public: Do you want long-term development or temporary freebies?” he stated, emphasizing that while free promises may offer immediate relief, they come at the cost of future growth and infrastructure improvements.
Preparing for a Sustainable Growth Path
As India’s government prepares to unveil its Budget 2025-26, Nagesh Kumar’s recommendations highlight the need for strategic investments in infrastructure and CapEx to ensure sustained economic growth. By continuing the momentum of infrastructure spending and addressing the challenges posed by global uncertainties, India can lay the foundation for a more robust and resilient economy.
ALSO READ: Budget 2025: Govt Could Cut Customs Duty On Raw Materials To Boost Manufacturing
